What happened
Shares of Coinbase Global (COIN 5.68%) had climbed more than 6% as of 12:43 p.m. ET on news that the large cryptocurrency exchange is nearing a deal to buy Latin America's largest cryptocurrency brokerage, Mercado Bitcoin.
So what
According to Bloomberg, the rumor first came from a local newspaper called O Estado de S.Paulo, which also did not specify how it obtained the information regarding the deal. Specifically, the deal is for Coinbase to buy a Brazilian holding company called 2TM, which controls Mercado Bitcoin. 2TM is a unicorn, meaning it has a valuation of more than $1 billion. Coinbase is expected to close on the deal in April, according to news reports.
Image source: Getty Images.
Latin America has become one of the next big banking markets ripe for disruption, with lots of citizens new to banking and tons of room for growth. Traditional banks in the region are known for attaching high fees to their products and making banking difficult to access for the everyday customer. This makes the market ideal for fintech start-ups. In recent years, many venture capital firms and other players such as Warren Buffett's Berkshire Hathaway have invested in banking start-ups in the region.
In addition, another cryptocurrency exchange, Binance, estimates that the crypto market in Latin America will one day be worth north of $25 billion.
Now what
Investors seem to think the news reports regarding the deal are credible, although the deal has not closed yet. Then there's also the question of how much 2TM might sell for, as acquirers are known for overpaying.
But in general, I expect the market is pleased because for a company like Coinbase, growing and expanding market share is critical in order for it to maintain its dominant position in the increasingly competitive crypto market.
